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Not much time today for discussion but this fight between Quicken Loans, who pretended to be making loans even though they were just a naked nominee at loan closings, is instructive about what really happened.
REAL enforcement cannot begin until everyone starts with the right premise, to wit: that investment banks sold an IPO for thousands of inactive, empty entities and called them REMIC Trusts. No money went to the Trusts or the Trustees; and the investment banks, who are the only people who have proof of what happened with the same of mortgage backed securities, kept the money. No loan ever entered the trusts.
The money that appeared in loans to borrowers was received by the closing agent hours, days, weeks, months and maybe years after the borrower thought the closing was complete. And that money came from a pool of money extracted from investors under false pretenses. Since the investors had apparently contracted away their right to have any direct relationship with the borrowers, there was effectively no legal lender at closing.
Hence, the note and mortgage were executed in favor of an originator who posed as the lender, like Quicken loans. The only “creditor” for these loans were the defrauded investors (pension funds etc.). But they only had actions for fraud against the banks or potentially unjust enrichment against the borrowers, but no claim to foreclose on a defective mortgage. My solution is to send the rescission letter which is effective upon mailing. Whether it was timely or the loan did not possess the attributes of a loan that could be rescinded is a question of fact that needs to be raised by the lender, if there is one.
The question is whether there was factually a consummation of the loan and when — or if no consummation then the action by borrower should be to get back the note, get the mortgage satisfied and get back all money that was fraudulently taken from them or paid to others as compensation for the origination of the loan. Those are the exact same remedies as rescission. If the other side brings an action to declare the rescission vacated they must prove the loan, which they cannot do. They cannot rely upon instruments that are void (note and mortgage) to raise affirmative defenses or bring a lawsuit. They lack legal standing unless they can show that the transactions (origination and purchases of the loan) were real.
Until regulators actually accept the truth as a starting point they will be arguing around the problem rather than solving it.
Filed under: foreclosure